UPS is considering guarantees allowing others to send items
at fixed prices using its network of trucks, planes and
warehouses in order to maintain a sufficient number of European
competitors in overnight express shipments, the main concern of
EU regulators, said the people, who asked not to be identified
because the talks are private.

UPS is also looking at asset sales as part of a package of
solutions it may present to regulators as soon as tomorrow, the
people said. Anton van der Lande, a spokesman in Brussels for
Atlanta-based UPS, declined to comment on any possible remedies.

UPS’s takeover of TNT faces growing investor skepticism,
with the Dutch firm’s stock trading at a 21 percent discount to
the 9.50-euro-a-share offer price, as the world’s largest
package-delivery company struggles to win EU approval. Since
announcing the purchase on March 19, UPS has twice pushed back
the target date to complete the biggest acquisition in its 105-
year history as the regulatory review continues.

Regulators will look at whether the access remedy would be
effective and something they could monitor, said Bruce
Kilpatrick, a London-based lawyer with Addleshaw Goddard. They
would also seek views from rivals on how the network access
would work.

“For distribution networks, the issue is that it is not
just about price -- it’s also about service levels and terms of
access, so the remedy becomes significantly more complex,” he
said in an e-mail.

TNT Declines

TNT declined 13 cents, or 1.7 percent, to 7.47 euros at the
close of trading today in Amsterdam. The stock has climbed 29
percent this year, valuing the company at 4.06 billion euros.
UPS rose 0.8 percent to $72.71 at the close in New York.

“It suggests that all their other attempts to broaden the
EU’s view of the market haven’t worked,” said Damian Brewer, a
London-based RBC Capital Markets analyst who rates TNT
underperform. “The second thing is what level is the fixed
price set at? Who agrees what the price is set at and how long
for? That means you can get into the territory of being a price-
regulated utility.”

UPS’s bid requires “substantial remedies” to eliminate
antitrust concerns, EU Competition Commissioner Joaquin Almunia
said in a Nov. 2 speech. Regulators sent formal objections to
the companies last month listing possible issues with its bid
for TNT, which would double UPS’s size in Europe.

Asset Sales

UPS has been focusing on La Poste SA’s DPD parcel
distribution unit as the preferred buyer for its EU assets, one
of the people said. The aim is that by offering sufficient
assets as well as a network sharing agreement, DPD would be
considered a strong competitor by the EU, the person said.

UPS has also held informal talks with the Royal Mail Group
Ltd.’s GLS subsidiary as well as FedEx Corp. (FDX), the person said.
Royal Mail, La Poste and FedEx representatives declined to
comment on any possible talks.

FedEx will probably not purchase assets from the combined
company at this point because it wants the deal to be blocked,
three people said. FedEx may reconsider buying assets if it
believes UPS has found other viable buyers and the deal would
win EU approval, they said.

‘Helping FedEx’

“I had expected them to go pretty far, but not as far as
helping FedEx to create a stepping stone to expand in Europe,”
said Marcel Achterberg, an Amsterdam-based Petercam analyst who
recommends buying TNT stock. “If they’re willing to do that,
the risk of them walking away because of the remedies is smaller
than expected, so I would say it’s a positive.”

When UPS and TNT originally agreed to the takeover, the
company estimated it may need to sell TNT’s international small
parcel business, which has sales of about 900 million euros and
is largely present in Europe, one of the people said. UPS’s
offer to the EU this week may differ from the initial estimates,
said the person.

When UPS and TNT originally agreed to the takeover, the
company estimated it may need to sell TNT’s international small
parcel business, which has sales of about 900 million euros and
is largely present in Europe, one of the people said. UPS may
have since tweaked the asset offer as the EU’s objections
exceeded the company’s expectations, said the person.

Regulators told UPS last month that its bid for TNT would
remove one of its few serious competitors in the European
delivery services market, a person familiar with the regulators’
complaint said at the time.

TNT and Deutsche Post AG (DPW)’s DHL, the market-share leader,
are UPS’s main competitors for next-day express deliveries
within Europe, according to the European Commission’s antitrust
objections, said the person, who saw the confidential charge
sheet on the matter.

Deutsche Post CEO Frank Appel said in a Frankfurt interview
he was unable to comment until he had seen the full proposals.